My Own Made Trading System

[steveh2009 10]

"After 2 win/losses cease trading for the day"

 

If you were flipping a fair coin and you made $150 if you guessed right and lost $100 when guessed wrong, would you limit your flips per day to the above rule? I think not.

 

If you are taking good trading signals which fit your plan, you would actually want to take as many of them as you could per day, allowing the odds to play out. You cannot increase your odds of success by making ad hoc rules based on a number of consecutive wins or losses. All you would be doing is delaying the inevitable should your system not have a positive expectancy. Drawdowns have no memory of which day it is or when they started.

 

True, human beings feel the emotions of winning or losing many trades in a row. But you cannot control the long-term outcome of a probability distribution by restricting your exposure to it.

[pipsaholic 10]

I learned from a trades pscology apparantly after 2 good winning trade 20-100 point wins you start to feel invinceable and end up giving it back and after 2 losing trades you start a losing streak.

[TheDude 10]

How do you define "the TA approach"?

 

 

indicators and chart patterns.

 

i admit some volume based indicators are of value, and i still take a look at bollinger bands from time to time to assess transitions. but they must be put into context.

 

it has been proven that TA holds no significant value. im sure if we are all honest here, we all went through the phase of spotting a head and shoulders pattern, trade it, just to watch it turn into another chart pattern - like a triangle with failed breakout, a trading range/rectangle, etc. it's all BS. chart shapes have one purpose - hindsight trading. they just seem so obvious when you look at them from the past

 

as for indicators, well they are usually some rehash of momentum based indicators - which comes with a parameter which you set to determine how far behind the rest of the crowd you want to be. dont make sense. you wanna be in on the get-go

 

and another thing......

 

mp is not an indicator, nor is a bar chart, a price, or a volume reading. if anyone says so, they are just trying to be a smart ass and play with semantics.

 

sermon over.

[MightyMouse 12]

indicators and chart patterns.

 

i admit some volume based indicators are of value, and i still take a look at bollinger bands from time to time to assess transitions. but they must be put into context.

 

it has been proven that TA holds no significant value. im sure if we are all honest here, we all went through the phase of spotting a head and shoulders pattern, trade it, just to watch it turn into another chart pattern - like a triangle with failed breakout, a trading range/rectangle, etc. it's all BS. chart shapes have one purpose - hindsight trading. they just seem so obvious when you look at them from the past

 

as for indicators, well they are usually some rehash of momentum based indicators - which comes with a parameter which you set to determine how far behind the rest of the crowd you want to be. dont make sense. you wanna be in on the get-go

 

and another thing......

 

mp is not an indicator, nor is a bar chart, a price, or a volume reading. if anyone says so, they are just trying to be a smart ass and play with semantics.

 

sermon over.

 

OK, so MP is it and everything else sucks.

[TheDude 10]

OK, so MP is it and everything else sucks.

 

yup. in my world thats pretty much it - except for the MD trader display

 

The issue is with TA is that i 'think' it makes people try and create hard rules. 'Having a plan' is another one that gets misunderstood and makes the self taught trader blow is dough on hard rules (another thread surely). what could be worse in one of the most dynamic environments we interact with? it seems to encourage trading break outs imo of whatever shape or confirmation in indicators some one needs - by which time, others have already bought in anticipation and are already busy trading with the breakout trader.

 

may be i just sucked as a TA trader? Hell, i could have even taught linda lovelace a thing or 2 i was that bad at it!

Edited December 23, 2011 by TheDude

[joshdance 10]

indicators and chart patterns.

 

...

 

it has been proven that TA holds no significant value. im sure if we are all honest here, we all went through the phase of spotting a head and shoulders pattern, trade it, just to watch it turn into another chart pattern - like a triangle with failed breakout, a trading range/rectangle, etc. it's all BS. chart shapes have one purpose - hindsight trading. they just seem so obvious when you look at them from the past

 

While I essentially agree with your argument, there's really no validity in what you say that "it has been proven that TA holds no significant value." You should know that that's a very subjective subject, and can no more be proven or disproven than the statement that "Hondas are much better cars than Toyotas." There's no criteria, no objectivity there. For you personally, traditional TA obviously holds no water, and that's cool.

 

I do not really give much brain power to searching for "pictures" such as head and shoulders, and the rest. However, there is great power in the ability to recognize a move out of consolidation for example. Or, in identifying how price moves within a channel. Or recognizing what a trending movement looks like, and understanding the normal retraces that happen, and what those look like.

 

I think the problem comes when people try to be robots and mechanically trade something because the picture looks like what they are used to seeing. Being able to recognize the sentiment of the market, being able to read the volume, and putting the market into context are all things that I think good traders have a good grasp on. I've heard it said that you don't have to be smart to be a good trader, but I don't buy it. Smarts alone won't get the job done, that's for sure, because there are a ton of smart people trading who are mentally not with it and do psychologically stupid things (I've had my share of "what the hell is wrong with me" days where I self-sabotage, etc.). But neither will not engaging the brain and clicking "buy" when you see something that looks like a bull flag.

 

I group "support and resistance" under the "traditional TA" category, and use these concepts quite a lot every day. Sometimes I will use price alone, sometimes I use the profile. But again, the problem comes when people just buy or sell blindly. The NOW is always more important than the past. Reading the mood and sentiment as the potential level of support is approached is really the key.

 

yup. in my world thats pretty much it - except for the MD trader display

 

The issue is with TA is that i 'think' it makes people try and create hard rules. 'Having a plan' is another one that gets misunderstood and makes the self taught trader blow is dough on hard rules (another thread surely). what could be worse in one of the most dynamic environments we interact with? it seems to encourage trading break outs imo of whatever shape or confirmation in indicators some one needs - by which time, others have already bought in anticipation and are already busy trading with the breakout trader.

 

Agree again, except that while I use the DOM and tape quite a bit to gauge sentiment, I probably do not focus as extensively on it as you do. I don't need to and have no desire to drill further than I currently do, as my "zoom level" is sufficient for the type of trading I do.

 

Certain rules are helpful. However, people talk about rules, and I just don't get it. I'm not the best trader and not even close, so maybe when I get better I will. A rule that says "don't lose more than $X in a day because you're sucking and not in sync with the market" is good I think. But technical rules are just too hard for me to quantify to make them of any use to me. Perhaps someone who is very rule-based could give me an example of a set of trading rules. Chances are, they're more like guidelines, and belong in the "duh, dumbass" category. I've seen people with written "rules" that are things like: (1) Don't trade before 9:30am; (2) Only trade long when above the VWAP and vice-versa" and other things like this. Inflexible, or obvious, or... again, if anyone has rules like this can you maybe post a couple of them and how they are helpful to you?

[MightyMouse 12]

While I essentially agree with your argument, there's really no validity in what you say that "it has been proven that TA holds no significant value." You should know that that's a very subjective subject, and can no more be proven or disproven than the statement that "Hondas are much better cars than Toyotas." There's no criteria, no objectivity there. For you personally, traditional TA obviously holds no water, and that's cool.

 

I do not really give much brain power to searching for "pictures" such as head and shoulders, and the rest. However, there is great power in the ability to recognize a move out of consolidation for example. Or, in identifying how price moves within a channel. Or recognizing what a trending movement looks like, and understanding the normal retraces that happen, and what those look like.

 

I think the problem comes when people try to be robots and mechanically trade something because the picture looks like what they are used to seeing. Being able to recognize the sentiment of the market, being able to read the volume, and putting the market into context are all things that I think good traders have a good grasp on. I've heard it said that you don't have to be smart to be a good trader, but I don't buy it. Smarts alone won't get the job done, that's for sure, because there are a ton of smart people trading who are mentally not with it and do psychologically stupid things (I've had my share of "what the hell is wrong with me" days where I self-sabotage, etc.). But neither will not engaging the brain and clicking "buy" when you see something that looks like a bull flag.

 

I group "support and resistance" under the "traditional TA" category, and use these concepts quite a lot every day. Sometimes I will use price alone, sometimes I use the profile. But again, the problem comes when people just buy or sell blindly. The NOW is always more important than the past. Reading the mood and sentiment as the potential level of support is approached is really the key.

 

 

 

Agree again, except that while I use the DOM and tape quite a bit to gauge sentiment, I probably do not focus as extensively on it as you do. I don't need to and have no desire to drill further than I currently do, as my "zoom level" is sufficient for the type of trading I do.

 

Certain rules are helpful. However, people talk about rules, and I just don't get it. I'm not the best trader and not even close, so maybe when I get better I will. A rule that says "don't lose more than $X in a day because you're sucking and not in sync with the market" is good I think. But technical rules are just too hard for me to quantify to make them of any use to me. Perhaps someone who is very rule-based could give me an example of a set of trading rules. Chances are, they're more like guidelines, and belong in the "duh, dumbass" category. I've seen people with written "rules" that are things like: (1) Don't trade before 9:30am; (2) Only trade long when above the VWAP and vice-versa" and other things like this. Inflexible, or obvious, or... again, if anyone has rules like this can you maybe post a couple of them and how they are helpful to you?

 

Only take range base trades if the overnight of a particular instrument is only a particular number of ticks and there is no major news pending.

 

Over night means from Chicago open to almost up to the NY open before a major news announcement.

 

If there is major news pending, then try to get positioned for a move one way or the other before the news.

 

If the overnight range is more than a particular number of ticks for a particular instrument, then do not take range based trades; instead, take directional trades and try to add.

[phantom 16]

It has been proven that TA holds no significant value. im sure if we are all honest here, we all went through the phase of spotting a head and shoulders pattern, trade it, just to watch it turn into another chart pattern - like a triangle with failed breakout, a trading range/rectangle, etc. it's all BS.

 

Dude,

 

You've GOT to be kidding???

TA has no value?

You've been trading professionally HOW LONG???

 

Just because you don't know how to trade technically doesn't mean it can't be done.

Just like the fact that just because you cannot perform brain surgery doesn't mean it can't be done.

 

Just WHO proved that TA holds no significant value??? It sure as heck wasn't you.

So stop spreading BS on this website until you KNOW WHAT YOU"RE TALKING ABOUT!!!

 

I'll put my TA against you're whatever any day of the week. I'm not managing 1/2 MM dollars because of my good looks.(Although, I'm pretty good looking).

 

Get a life.

[joshdance 10]

Only take range base trades if the overnight of a particular instrument is only a particular number of ticks and there is no major news pending.

 

Over night means from Chicago open to almost up to the NY open before a major news announcement.

 

If there is major news pending, then try to get positioned for a move one way or the other before the news.

 

If the overnight range is more than a particular number of ticks for a particular instrument, then do not take range based trades; instead, take directional trades and try to add.

 

Thanks MM -- these are really not rules, but rather guidelines. They are general enough to be flexible, but specific enough to give guidance, and this is what I think traders do well to have. A "rule" would be so specific as to be programmable, and could not contain a notion of "trying" to do something, or defining exactly what a range base trade is, or would seek to objectively state where to add, and how much, etc... so, what many traders call rules are actually guidelines, and I think the danger lies in blindly following the rules all the time. It's as if the rules were sent down from the gods and are guaranteed to make money if followed to the letter. They perhaps don't consider that the rules themselves are rubbish and that it's like following a road map off a cliff.

[onesmith 10]

The idea behind qutting for the day when you're losing might be viable. It depends on your rules and must be retested if your rules change. It's a serial correlation test. If sc>0 then serial correlation exists else if sc<0 then what does that mean? What should I do if sc < 0 ?

[MightyMouse 12]

Thanks MM -- these are really not rules, but rather guidelines. They are general enough to be flexible, but specific enough to give guidance, and this is what I think traders do well to have. A "rule" would be so specific as to be programmable, and could not contain a notion of "trying" to do something, or defining exactly what a range base trade is, or would seek to objectively state where to add, and how much, etc... so, what many traders call rules are actually guidelines, and I think the danger lies in blindly following the rules all the time. It's as if the rules were sent down from the gods and are guaranteed to make money if followed to the letter. They perhaps don't consider that the rules themselves are rubbish and that it's like following a road map off a cliff.

 

There is a certain " If "A", then do "B" to it.

 

When the range is small if i am going to take a trade, I lower the contracts, and change to a higher risk, low reward, high probability trade.

 

I call it discretionary; however, the intuitive part of discretionary trading is really just someone combining past events and projecting them onto current or future conditions. It's brilliance when we are right, and just another bad trade or lack of discipline when we are wrong.

[ratmpower 10]

I think the danger lies in blindly following the rules all the time. It's as if the rules were sent down from the gods and are guaranteed to make money if followed to the letter. They perhaps don't consider that the rules themselves are rubbish and that it's like following a road map off a cliff.

 

Well, the danger is not in blindly following the rules. It is in blindly following bad or incomplete rules.

Let us say you do NOT blindly follow the rule, but you use your judgement or rationale or gut-feeling or whatever you call it to make your trade decision. Even in that case, you are still sub-consciously following a rule inside your mind. Its just that they are so complex that they cannot be expressed in mathematical or programmatic terms on paper.